DENMARK: Students to pay for income tax cuts

Danish higher education is in uproar after a panel of experts reviewing tax reforms suggested the maximum duration of state study grants should be reduced from six to four years. The experts argue that students on longer academic studies later in life will be among those benefiting most from their proposed tax cuts. Opponents fear that progress in social emancipation will be set back years, if not decades.

In the midst of global financial turmoil, Denmark is reviewing its entire constellation of taxes, generally considered to be among the most burdensome in the world. The (liberal) government wants to see income taxes cut to keep people motivated to work once they reach the ceiling where the heaviest taxes kick in. The resulting space in the government coffers must be filled from elsewhere. Reducing grants for students is one of the proposed compensation measures.

All Danish students currently receive some 5,000 Danish crowns (US$900) per month in government support for a maximum of six years. In addition, they can borrow money against attractive interest rates - and most students do. The proposed reforms would cut the maximum grant period back to four years, converting the last two years into a period that is exclusively covered by loans.

Even today, many students need to resort to loans when they reach their seventh year of higher education, either because they study long degrees such as medicine, or because they have changed track at some point during their studies. The new proposals would, however, cut even the fastest students on long degrees off government support in their last years.

Criticism comes from all across society, where opposition parties, trade unions and university managers are joining with students in their protests. The critics have two main arguments: reducing the number of years of government support will redraw the fault line across social classes, with students from less affluent families more reluctant to take up longer studies.

The proposal will also eat away at the painstakingly developed flexibility of higher education as it will hit hardest those students that regret their choice of study and want to change courses.

Although the panel's argument that students on the longest studies will draw the greatest benefit from the reforms later in life may be valid for those studying medicine or law, it need not be for those changing from one undergraduate programme to another.

The proposed changes to study financing would only raise about 2.2% of the funds needed to finance the total package of income tax cuts. According to one opposition party, such small change can easily be recovered by slightly raising taxes on soft drinks, sugar and tobacco.

After studying the recommendations, the government will put forward its proposals in the first week of March.

ard.jongsma@uw-news.com